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SAN FRANCISCO (MarketWatch) — Almost five full years into the housing downturn, it’s still cool to be bearish on real estate. But cool isn’t always right.

Despite headwinds such as looming shadow inventory, a lackluster job market and geopolitical instability, there are plenty of reasons why rose-colored glasses may be the real-estate eyewear of choice.

And while it may finally be time to be bullish on housing, there is one huge caveat.

The local bottom that the broad housing market experienced in April 2009 may yet be surpassed to the downside. If it is, housing bears will pound their chests, stubborn pessimism vindicated. They will be mistaking the trees for the forest. This recovery, which in many areas remains in full force, has been, and will continue to be, highly local in nature.

More home buyers paying cash

Increasingly, home buyers are selling investments to raise cash to pay for real estate, sensing a bottom in the housing market.

Fundamentally strong markets have thrived, while weak ones have languished. National, state, and even city-level indicators have been masking trends that are ongoing on a neighborhood level. This will continue, and those that ignore it will miss out on countless opportunities. Read Minyanville’s “Searching for a Real Estate Recovery.”

So without further ado, 10 reasons to be bullish on housing:

1. Jobs. Housing follows jobs. Period. And while the job market is still bunk in many areas, pockets of strength are emerging. After Google Inc. /quotes/comstock/15*!goog/quotes/nls/goog (GOOG624.50, +8.06, +1.31%) announced it would be hiring as many as 6,000 new employees, the Silicon Valley powerhouse received 75,000 applications in two weeks. The company is looking to retain talent in its fight against local rivals like Apple Inc. /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL356.85, +2.31, +0.65%) , Salesforce.com /quotes/comstock/13*!crm/quotes/nls/crm (CRM141.51, +3.55, +2.57%) and Yahoo Inc. /quotes/comstock/15*!yhoo/quotes/nls/yhoo (YHOO16.85, +0.23, +1.38%) , along with social media upstarts like Facebook, Twitter, and Zynga. If housing really does follow jobs, the San Francisco Bay Area may prove to be a bright spot in 2011.

2. Jobs. At the risk of being redundant, housing follows jobs. Consumer confidence is close to reaching last spring’s high point, the most optimistic the U.S. has felt since 2008. And while hiring hasn’t restarted in earnest, firing has slowed to a drip. If you haven’t been fired, chances are your job is reasonably secure. Job security drives optimism, planning for the future and … home buying. For more on employment, see Minyanville’s Why the January Jobs Report Is Alarming.

3. Pent-up demand among young adults. Consider this: 2006 college grads entered the labor market just as home prices began to collapse. Those who still have a job kicked and scratched their way through the Great Recession and are now 27, perhaps married or getting there and kids may be on the horizon. Some were even smart enough to save some money. According to a graph produced by economist Tam Lawler and posted on Calculated Risk, today’s young adults are under-represented as homeowners compared to historical norms, and a disproportionately large chunk lives at home. As the job market crawls back to life, this trend is likely to reverse. And if the apartment market’s snappy performance in 2010 is any indication, it already has. Read “More people choosing to rent, not buy, their home.”

4. Foreclosures. Frankly, I’m getting tired of people claiming that an impending flood of distressed real estate is going to torpedo home prices. If you’re making that case, ask yourself if you really, truly have any idea what you’re talking about. Banks are rational actors, and as much as Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC14.77, +0.28, +1.93%) , J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM46.57, +1.04, +2.28%) , Citigroup /quotes/comstock/13*!c/quotes/nls/c (C4.88, +0.10, +2.09%) , Wells Fargo /quotes/comstock/13*!wfc/quotes/nls/wfc (WFC33.76, +0.76, +2.30%) and the rest are demonized, they rarely willfully destroy the value of their own assets — which is exactly what flooding the market with bank-owned properties would do. Coupled with political pressure and an ever-increasing maze of foreclosure litigation gumming up the repossession process, foreclosed inventory will continue at its steady stream. It will take years (around four based on current estimates) to work through shadow inventory, but there will be no flood.

5. Inflation. While much is made of inflation in the media, few pundits actually understand it. Inflation expectations, not inflation, are what we should be worried about. Things get scary when consumers start believing that prices are rising, or about to rise. Rational economic actions take hold, and rather than filling their tanks when empty, drivers fill whenever they pass a gas station. The expectation of higher prices, not higher prices themselves, is what changes economic actions. Rising inflation expectations pull demand forward, pushing up prices in an inconvenient self-fulfilling prophesy. Historically, real estate has been a rather good hedge against inflation. As people start to get nervous about inflation, they buy real estate. For more on how good a hedge real estate has historically been against inflation, read “If You Fear Inflation, Should You Buy Real Estate?” on Minyanville.

6. Higher rents and low interest rates. Ask a prospective tenant in a major metropolitan area how the apartment search is going and the response will not be pleasant. Rents are rising, inventory is down, and landlords are back in the driver’s seat. And despite a recent bounce, interest rates remain historically low. High rents and low interest rates push would-be renters towards buying, particularly in areas with job markets that are relatively less weak than the country at-large.

7. A booming apartment market. Investors are snatching up multifamily properties as positive demographic trends, low interest rates, and perceived values attract professional and amateur buyers alike. Homeownership is at a 10-year low, young adults are moving out of their parents’ basements and into apartments, and leverage is fantastically cheap. What more could an apartment buyer want? The multifamily space typically recovers first, and if history is rhyming in even the smallest way, this is good news for housing.

8. Investor appetite remains strong. From fedora-hat donning, Hawaiian-shirt wearing, clipboard-scribbling, earpiece-whispering professional investors at the courthouse steps, to vulture funds armed with hundreds of millions of dollars, investor demand for real estate remains robust. Distressed opportunities — across all types of real estate — have come to market slower than expected, which means buyers have had more time to hit the pavement and raise money. With limited opportunities, competing buyers are driving up prices of distressed assets: For every well-priced foreclosure there are a dozen all-cash buyers looking for a deal. And don’t forget the baby boomers, the first of which turn 65 this year. While many are eyeing trading down into a smaller, retirement-friendly home, even more are looking for reliable fixed income to pay for rounds of golf and tennis lessons. More than a few gray-hairs view real estate as their path to comfort during the golden years. Read “Cash Buyers Boost Battered Housing Markets” on The Wall Street Journal.

9. The stock market. With the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA12,273, +43.97, +0.36%) back above 12,000 and the S&P 500 Index /quotes/comstock/21z!i1:in\x (SPX1,329, +7.28, +0.55%) topping 1,300 for the first time since mid-2008, IRAs, 401(k)s and trading accounts are feeling fuller than they have in years. The wealth effect is in full effect, as buyers look to sell stock for a down payment and the confidence to pull the trigger on a new home.

10. Confidence. If you’ve made it this far without either scrolling down to question my sanity on the message boards or falling asleep, I salute you. And for the precious few readers who are still with me, consider this very important question: Do you feel better or worse about the U.S. economy, and more importantly your own personal economy than you did two years ago? This is not a political statement. Challenges remain, to be sure, but we Americans are a stubbornly resilient, optimistic bunch. Confidence is relative, and for a country that has been to economic hell and back since 2008, we are in remarkably better shape.

Confidence in the present builds confidence in the future, and confidence of all types increases risk-taking activities. Admittedly when you have seen the depths of despair, a single ray of dim light can feel like high noon, but it doesn’t matter. Confidence is a trajectory, a transitory voyage through time that is more accurately measured against where you just were than looking at the last time you were here. The fact that most people believe that we’re no longer headed for apocalyptic collapse is, as they say, a good thing.

Andrew Jeffery is a principal of Cirios Real Estate and Minyanville contributor.

NEW YORK (CNNMoney.com) — Bank repossessions and foreclosure auctions hit record levels in the third quarter, RealtyTrac said on Thursday.

372,445 foreclosure auctions were scheduled in July, August and September, while 288,345 properties were repossessed by lenders over the same time period.

Overall foreclosure filings edged up to 930,437 in the third quarter, a 4% increase from the previous quarter. One in every 139 homeowners received a foreclosure filing during those three months.

Bank repossessions, or REOs, also are on the rise. In September, a record 102,134 homes were taken back by banks. It’s the first time repos have topped 100,000 in a single month.

The uptick is not expected to last, RealtyTrac CEO James Saccacio said in a statement, because several major loan servicers have halted foreclosure sales pending a review of documents.

Nevada had the nation’s highest foreclosure rate, up 1% from earlier, for the 15th quarter in a row. One in every 29 Nevada homes received a foreclosure filing during the third quarter.

Looking at total numbers of foreclosures, neighboring California was worst, with 191,016, followed by Florida, Arizona, Illinois and Michigan. Combined, the five states accounted for half of all foreclosures last quarter.

On Wednesday, 50 state attorneys general announced a coordinated probe into improper foreclosures performed by the nation’s largest loan servicers but stopped short of calling for a nationwide freeze.

At least six major loan servicers are reviewing procedures or documents to determine whether shortcuts may have jeopardized the accuracy of foreclosure proceedings.

It remains unclear to what degree the foreclosure process will slow as a result.

If lenders resolve the document issues quickly, there will be a brief stop-and-go period before the market resumes normal function, Saccacio predicted.

But if the review expands to more lenders, Saccacio said, “We could see a chilling effect on the overall housing market.”

Four years after the collapse of the U.S. housing bubble, flipping homes is back in fashion.

Jon Mirmelli, a Phoenix real-estate investor, learned late on the morning of Sept. 28 that a never-occupied custom house on the northern fringes of Scottsdale, Ariz., was going up for auction around noon the same day. The six-bedroom home, built on a three-acre desert plot, has a kitchen with two dishwashers, four ovens, “antibacterial” copper sinks, and a master “spa” bathroom with space for a flat-screen TV visible from the tub.

The minimum bid, as set by a unit of Citigroup Inc., which had a $1.3 million mortgage on the home, was $379,900. After several minutes of bidding among investors and their representatives, some wearing shorts and flip-flops, Mirmelli won the home for $486,300. A week later, he agreed to sell it for $690,000 to a woman who moved in this month.

During the housing boom, millions of Americans tried to make money by buying and then quickly reselling new houses and condominiums. That kind of flipping stopped several years ago, as home sales stalled amid a surge in foreclosures and curtailed lending.

While rising foreclosures and disappearing jobs still threaten the comeback, there are now bidding wars for houses in some cities, and U.S. home sales are nearly 36 percent above their low point in January.

As millions of Americans struggle to hold on to their homes, Wall Street has found a way to make money from the mortgage mess. Investment funds are buying billions of dollars’ worth of home loans, discounted from the loans’ original value. Then, in what might seem an act of charity, the funds are helping homeowners by reducing the size of the loans.

Home sales surged in the Western region of the country last month as many first-time homebuyers rushed to complete their deals before a temporary tax credit expires next month, according to two reports released Friday.